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The Quandry of the Sugar Beets

I think that I have finally isolated the great symbol of a recent set of intellectual and spiritual quandaries that I have found myself working through of late. I am not talking about polygamy, Adam-God, or blood atonement. I have in mind an even more challenging remnant of our past: sugar beets.
Sugar beets are beets from which can be distilled sugar. (Hence the name.) The actually account for a fair amount of the sweeteners used in the United States, corn syrup being the other big one. Furthermore, Mormons have been into sugar beets in a big way for a long time. In his quest for potential cash crops for the Mormon commonwealth, Brigham Young hit upon the idea of growing sugar beets, which at the time were an exotic, cutting edge agricultural technology. Apparently getting the sugar out of the beets is a rather complicated process. Brigham sent John Taylor on a mission to France to get the necessary technology and Mormons spent the rest of the 19th century trying to grow sugar beets in the soil of Utah and south-eastern Idaho. Initially, the alkaline soil chemically changed the beets, messing up the French technology, but Brigham ? and later John Taylor, Wilford Woodruff, and Lorenzo Snow ? persisted. Cooperatives were set up. New methods were developed, and in the end the sugar beet took its place in the pantheon of the Inter-Mountain West’s staple crops. Today, Church owned farms continue to grow sugar beets.

At this point, I am sure that you ? gentle reader ? are yawning. For crying out loud! What is so interesting ? let alone disturbing ? about sugar beets. My problem comes from the fact that strictly speaking, it doesn’t make any sense to have sugar beets. You’ll notice that none of the sugar you buy in the store comes from sugar beets. It all comes from sugar cane, mostly grown in Hawaii or the Caribbean. Sugar-beet sugar, which is of an inferior quality, is used in “industrial” products, e.g. soda, processed food, etc.. The reason that we have a sugar beet industry today is that the government protects it. We subsidize sugar beet farming and limit competition from sugar cane grown south of the border ? and south of the Florida keys.

The sugar beet seems to me like a good symbol of 19th-century Mormon communitarianism. It represented a melding of central economic planning (people were called on sugar beet missions), the melding of ecclesiastical and temporal concerns, and the attempt to establish an economically viable and independent Mormon community. In short, it seems to me that the sugar beet represents an important and in some ways halcyon moment in our history. It is all together a product of that dream of a very literal Mormon Zion. Like it or not, we all bear the marks on that communitarian dream in one shape or another.

Sugar beet production, however, was only remotely feasible because high transportation costs meant that Brigham’s Deseret would never have to compete with cheaper, higher-quality sugar from abroad. The same can be said of the communitarian Zion in general. It existed because of isolation and high barriers to entry. Initially these barriers were geographic. Later, Brigham tried to construct purely ideological barriers, like Zion’s Co-operative Mercantile Industries which was essentially a cartel of Mormon businesses against Gentile competitors. Not surprisingly, ZCMI ultimately failed to stem the falling barriers to entry into Mormondom. Despite flirting with Dannites, Avenging Angels, and out right war with the United States, ultimately Brigham ? and more dramatically Wilford Woodruff ? decided that they were not willing to resort to violence to set up permanent barriers around the kingdom. Hence the Zion of Deseret died.

The sugar beet survives precisely because the United States government has not fully taken the course adopted by Brigham and Wilford. It still uses the Coast Guard and the Customs Service ? in other words people with guns ? to keep out the sugar cane. In so doing it props up a hand full of farmers in Idaho, Oregon, and Washington by denying far poorer farmers in developing countries access to a lucrative market. It takes from the impoverished and gives to the lower middle class.

As should be clear, I think that the sugar beet industry should be taken out behind the barn and shot. Or more precisely, I think that it ought to pay its own way against sugar cane competition. This seems like a wiser and more just course to take. Yet, if I had my way yet another lingering institution of Brigham’s Zion would die.

There is much more at stake here than nostalgia. What is at stake is how I think social justice ought to be conceptualized. Do I opt for the individualist freedom that favors the sugar cane farmers or the lingering communitarian vision that favors the sugar beet farmers. By siding with liberalism and sugar cane against communitarianism and sugar beets, I feel as though I am on the other side of a gulf from Brigham and his Zion. It is a gulf that the Church, beginning with Brigham himself, seems to have crossed. Yet I am uncomfortable setting my back inevitably against the sugar beet past. I would like to salvage something of the communitarianism without paying the costs that the barriers upon which it depended ultimately created.

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90 comments for “The Quandry of the Sugar Beets”

Scott

April 7, 2004 at 3:55 pm

Domestic sugar cane and beet producers don’t benefit from current trade policy (e.g., non-recourse loans to producers and tariffs on foreign cane sugar) nearly as much as the producers of corn, since high fructose corn syrup is now the sweetener of choice in the American food industry. Not that I disagree with your point. But corn dwarfs sugar beets in political stroke.

Scott

cooper

April 7, 2004 at 4:17 pm

Scott’s right Nate. And sorry Nate, beet sugar is sold in stores. I used to work for a buying company for a MAJOR retail chain. Our privatel label, and other food companies, private label sugar is beet sugar. And let’s not forget U&I Sugar. It is also beet sugar.

cooper

April 7, 2004 at 4:21 pm

Oh and Nate, I’m in agriculture too. Don’t get me started on subsidies!

cooper

April 7, 2004 at 4:46 pm

Okay Nate, U&I stopped production in 1978. We still have Imperial Holly Sugar. Known and Imperial Holly, Holly, and Dixie Crystals. 25000 acres in the Columbia Basin. And it is table sugar. Beet sugar production costs are about half of what potatoes cost to grow with the same amount of work and a slightly higher yield. And then throw in the subsidies and you know why it is still being produced. In fact the Columbia Basin plant was put into production in the last half quarter century. Beet sugar does sell for less than cane sugar and the average american palate can’t really discern the difference.

Kaimi

April 7, 2004 at 4:53 pm

I don’t know these issues very well, but I wonder how beet sugar would fare if sugar tarrifs were dropped. I suspect it would not fare particularly well. (I also suspect that much U.S. cane sugar wouldn’t fare very well). I’ve seen occasional articles complaining about the sugar tarriffs, but not enough to really form an opinion.

Frank McIntyre

April 7, 2004 at 4:55 pm

How about you grow sugar beets in your personal garden. You can have your son weed them while you read passages from Arrington’s “Great Basin Kingdom”! Not only will this supplement the meager income you will receive as a high profile lawyer, it will provide your family with a tasty family home evening treat. Anybody have any sugar beat recipes?

It is fairly easy to tell the difference between foreign Coke (cane sugar) and domestic Coke (corn syrup). I obviously defer on the details of sugar beets to those who know better than myself.

chris goble

April 7, 2004 at 5:13 pm

I remember driving by a huge pile of beats on my way to work. It was covered in a big tarp and took me some time to decipher. The pile was at least as big as any California Wal-Mart. Beets have to have a freeze thaw cycle to generate the sugar.

With that aside, perhaps I should extend the analaogy. Don’t we have to go through a similar cycle of good and bad times to progress. I think the removal of consequences through well intentioned liberal policies is unltimately damaging. While it is nice to remove the harsh realities of the world, limiting the consequences of genocide, evil dictactors, bad parents, students who skip classes, etc, a world without consequences just sets things up for one big collapse. Reading Lee Harris’ book Civilization and its enemies has got me thinking a bit more about this. Fantasy ideologies, like what Nate talks about, are sure to have spin off consequences. Once you start living in a fantasy (idealistic) world, it is hard to not go to extremes.

Chris: I am curious. In what sense do you think that I described a fantasy ideology?

Charles

April 7, 2004 at 6:08 pm

I’m interested in fantasy ideologies myself. After all this is my world, everyone else just lives in it. Now that I’m asking for rent the guys with the white coats are commin’. :)

gst

April 7, 2004 at 6:38 pm

Those subsidies will probably cost as many US jobs as they preserve: Kraft has moved its LifeSavers candy production to Canada, and I have heard that Brachs is considering the same thing.

cooper

April 7, 2004 at 7:03 pm

gst don’t be naive to think that a subsidy program is the main reason Kraft has moved and Brachs is considering a move. If that were the case which job is better? The farmer and his employees are the major corporation and theirs? When people discuss the subsidy program there is always a reference to some fat cat farmer living off the “fat” and taxes of the rest of us. Tell that to the peanut farmers of Appalachia.

chris

April 7, 2004 at 7:12 pm

I think the fantasy is that people can create barriers that will prevent interaction with the outside world. Like Charles said, usually the only ones that manage to do that are “all tied up” in their own padded world :) A fantasy world, as I understand Harris is using it, seems to be one where normal interactions and consequences between people are ignored in favor of an ideal that is not rational according to current situations. In this sense, I think communitariasm is a fantasy. For it to work, there would have to be a significant change in the current social structure and culture. Now I don’t think there is anything wrong with some “fantasies” – things that don’t make sense in our current environment. I see the gospel as pretty much like this. Some things just don’t seem rational when interpreted from a western capitalist view. I just wonder how much we should try and change the way we think the outside world works in order to make things like sugar beet farming, or its gospel equivalent work.

That great sucking sound you hear are all the lifesaver jobs getting pulled to the Great White North. Wait…sucking sound? Life Savers? heh heh.

By this I mean no disrespect to the candy industry or its workers.

gst

April 7, 2004 at 11:55 pm

Cooper: I wouldn’t be so naive to suggest I know whether Kraft’s LifeSaver division moved because of any subsidy program. I only know what I read in the papers: they project that they will save about $10 million per year by not having to pay US prices for sugar, and so they moved. I guess we could hire an economist to tell us whether that has anything to do with US tariffs and subsidies.

My dislike for such tariffs and subsidies is not dependant on an image of subsidized farmers as “fat cats.” Sugar subsidies and tariffs, like all corporate welfare policies, stink on principle.

As to your question of “which job is better,” the farm or factory job, I have no idea. Why not see which jobs the market prefers? The other option is the one we currently have: me paying too much for my candy bars so farmers can grow an uncompetitive crop ineffeciently. Are sugar beets vital to our national defense or something?

cooper

April 8, 2004 at 1:02 am

gst this is probably the wrong place to continue this discussion. But I will forge ahead.

First off, you can’t believe everything you read in the papers. We have a biased media.

Even Kraft’s offical statement is that the cost of sugar was not the primary reason for making the move. There are several contibuting factors to take the business up north.

Number one was that they acquired the LifeSavers trademark and business interest in Canada solidifying the North American tright to the company name.

Number two was the fact that labor costs are on average $3.00 per hour less per production employee.

Number three was no union.

Number four was no more health care costs.

Number five the company no longer has the burden of a “long-term” employee base. Meaning that the average employee at the Holland Plant had a tenure of more than 10 years. The pension cost combined with vacation and sick time leaves can be a hefty sum for long term employees.

Number six was sugar costs. Sugar will be about 10 cents less in Canada. It’s per roll effect on LiveSavers will be about a penny a package.

Number seven, which happened to be the biggest factor of all, was an under utilized plant. When Kraft merged with Nabisco in 2000 they were forced to walk away from thier Buuble Yum line and Altoids line. These were produced at the Holland Plant. This caused a huge under-utilization problem for Kraft. Combine energy costs and insurance costs with the underutilization it made no business sense to keep it operating.

I list the factors in no order of importance in the decision making process, other than sugar not being number one, two or three and under-utilization being number one.

gst

April 8, 2004 at 1:26 am

Well, that will teach me to try to bluff my way through a sugar tariff discussion!

John H

April 8, 2004 at 1:44 am

“Sugar beet tariffs might be revoked were there not a powerful “sugar beet” lobby. Curse those special interests!”

Actually, it’s funny you should mention that. In the early 20th century the Church was investigated by Congress when it was charged they were fixing sugar prices and controling the votes of senators to get high tariffs. Joseph F. Smith was accused of accepting a $20,000 bribe for fixing prices (a lie). The history of American Sugar, Utah Idaho Sugar (U and I) and the Amalgamated Sugar Co. is actually pretty interesting.

Interesting post, Nate; as always, you find original ways to frame important issues. You did anticipate that I would respond at length, didn’t you?

“My problem comes from the fact that strictly speaking, it doesn’t make any sense to have sugar beets.”

Strictly speaking, you assert this without providing any framework for understanding how it is that sugar beet production is “senseless.” It plainly made sense to Young, Taylor, Woodruff, Snow & Co. Given that Church-owned farms continue to grow sugar beets, it plainly still makes some sense to someone, somewhere. Why doesn’t it make sense to you? Because the government currently protects and subsidizes its production? Because the role it played in 19th-century Mormonism’s communitarian economy was presumably dependent upon currently undesireable economic barriers? But that simply assumes, without argument, that unsubsidized, barrier-free markets are “sensible,” and alternatives are not. Maybe so. But you don’t argue it; you implicitly assert it. And isn’t it a little strange to hold up a relic of Mormon cooperative economics as a way to engage one’s thinking about “social justice,” when the way you do so has already labeled the social justice argument inherent in that relic to be senseless one? How then could the sugar beet actually challenge your thinking? You say that “there much more at stake here than nostalgia,” but assuming you mean what you say when you describe the production of sugar beets as senseless, how could the “quandry of the sugar beets” ever actually present you with such?

“Sugar-beet sugar, which is of an inferior quality…”

You may very well be right. But 1) as Cooper points out, beet sugar is still marketed for consumption, meaning at least someone is willing to buy it; 2) your own example of the different tastes of different sweeteners makes use of corn syrup vs. sugar cane, not sugar beets; 3) as with your comment above about sugar beets “not making sense,” you do not explain what you mean by the label “inferior.” Do you mean quality of taste, nutrition, health consequences, ecological impact, socio-econimic affect on labor, all of the above? Something may be inferior in one way, but superior in another; am I to assume that you have a predetermined hierarchy in place here? Personally, I detest the way American agribusinesses and government policy have combined to make unhealthy, environmentally toxic and cheap (and therefore economically exploitive) corn products the primary sweeteners in American diets; I can do that, because I’m willing to engage in a relative evaluation of corn production in light of social and physical, as well as economic values. To defend in principle an arrangement which subsidizes the production of a particular good does not mean one is unable to critique the benefit of disparate arrangements. By stipulating the inferiority of the sugar beet beforehand, you make it easier to imply, whether you intended to or not, that all forms of communitarian arrangements are by definition arrayed against simple (economic?) common sense.

“Sugar beet production, however, was only remotely feasible because high transportation costs meant that Brigham’s Deseret would never have to compete with cheaper, higher-quality sugar from abroad. The same can be said of the communitarian Zion in general. It existed because of isolation and high barriers to entry….Despite flirting with Danites, Avenging Angels, and outright war with the United States, ultimately Brigham – and more dramatically Wilford Woodruff – decided that they were not willing to resort to violence to set up permanent barriers around the kingdom. Hence the Zion of Deseret died.”

So…communal choice had nothing to do with it? A shared vision, a collective good, a common will? The only reason Mormon communitarianism experienced whatever success it did was because, for a couple of decades at least, the individual Mormons who crossed the plains didn’t have anyplace else to shop, literally and metaphorically? I guess that’s the consumer model for you. Again, it’s entirely possible that you’re correct. However, if the point of your post is to use the sugar beet to think broadly about the material conditions of Mormon communitarianism, then it seems appropriate to recognize that retail habits were not the sole, or even the most important, expression of that communalism. Some collective enterprises endured (like the sugar beet) while others didn’t; similarly, some habits flourished even while other patterns of life changed. And your claim that Young, Woodruff & Co. were unwilling to engage in violence to maintain their theocratic, communitarian preserve is a little rich, given that we didn’t fire the first shot, and that is was U.S. courts of law (and police and militariy power) which mandated the abandonment of some of our more distinctive habits. Indeed, to an extent that fact undercuts your claim that it was merely a matter of “barriers” that kept 19th-century Mormons attunded to their collectivity for so long. (And please note that I write this as one who is often convinced that it was a good thing that the 19th-century Mormon community was broken; it isn’t impossible to defend the reality and legitimacy of collective determination while at the same time recognizing the value of submersion within the liberal order, assuming that’s what America was (another debatable point).)

This is getting really long.

“The sugar beet survives precisely because the United States government has not fully taken the course adopted by Brigham and Wilford….it props up a handful of farmers in Idaho, Oregon, and Washington by denying far poorer farmers in developing countries access to a lucrative market. It takes from the impoverished and gives to the lower middle class.”

A misleading but not entirely inaccurate statement. I’m entirely willing to accept my lumps for defending basically (though not absolutely) protectionist policies. But as far as moral theory goes, doesn’t the above comment at least partially contradict points you’ve made elsewhere? Haven’t you, in a couple of previous threads, strenuously questioned, even condemned, the sort of morality which posits “universal” concerns (for the world’s poor, etc.)? It seemed that you were claiming that any moral action which is worthy of the name needed to involve specificity and accountable contributions, not just an open-ended obligation. Well, sustaining lower-middle-class communities right in our own polity seems a pretty responsible expression of one’s desire to aid the poor, whereas this idea that we ought to sacrifice the livelihood of those folks for a bunch of desperately poor, completely unknown global actors strikes me as the opposite. Not that it’s wrong–after all, I was the one defending open-ended obligations. But then I was talking about personal relations rather than political or economic ones; if I read your defense of global, barrier-free trade correctly, you have flipped those positions. A mistake? Or do you really believe that the market can accomplish something “moral” that human beings can’t?

“I think that the sugar beet industry should be taken out behind the barn and shot. Or more precisely, I think that it ought to pay its own way against sugar cane competition. This seems like a wiser and more just course to take.”

So “justice” raises its head in association with competition for market shares. How is this “just,” and to whom does it do “justice” to? The aforementioned farmers of the third world? How does that weigh out against the aforementioned lower-middle-class communities? Do we have some sort of utilitarian scheme of justice in place here, or is it more abstract–a sense that the market, as a place of contracts, is itself “just” in some pure sense?

“I would like to salvage something of communitarianism without paying the costs that the barriers upon which it depended ultimately created.”

I sympathize (for my part, I would like to recreate liberalism so that it doesn’t involve antagonism to collective goods). But I really don’t know what kind of community can be maintained if one doesn’t accept the borders of said community. Interrogate, evaluate, and critique barrier costs, yes; but to wish to eschew them entirely is to wish for no barriers (social, political, economic, etc.) at all, and that means no collectivity whatsoever.

Remember Nate: I fisk, because I care.

Frank McIntyre

April 8, 2004 at 9:37 am

“But that simply assumes, without argument, that unsubsidized, barrier-free markets are “sensible,” and alternatives are not. Maybe so. But you don’t argue it; you implicitly assert it.”

Whether or not beets _were_ sensible in the 19th century for the Mormons, Nate’s point is that they are now only around because of subsidies. Given the cheap cost of transportation, it is “sensible” to have beets produced by whoever can do it cheapest, if one’s goal is to get beets. If one’s goal is social justice, it is still “sensible” to have beets produced at the lowest cost, and then use the extra money consumers gain to help out those hurt by changing policy. The key to free trade arguments is that the money saved in cheaper beets is always more than the money lost helping beet farmers change jobs. If the beet farmer does not wish to change jobs, then they are free to sell beets at the world price. But instead of subsidizing them through inefficiently high beet prices, you can just right them a lump-sum check (or the equivalent) which distorts no markets _and_ makes the beet farmer happy.
“Sugar-beet sugar, which is of an inferior quality…”
The best definition here is probably— “For the amount of money it takes in the U.S. to produce some predetermined amount of beet sugar, I can produce more (or a tastier kind) of another form of sugar.“ The socio-economic and environmental stuff is fine and dandy but does anyone here have strong prior information about the relative environmental virtues of beet vs. cane sugar? Probably not, so there is little reason to assume one is better than the other. If someone does have that sort of comparative information, then we can discuss that.

“Well, sustaining lower-middle-class communities right in our own polity seems a pretty responsible expression of one’s desire to aid the poor, whereas this idea that we ought to sacrifice the livelihood of those folks for a bunch of desperately poor, completely unknown global actors strikes me as the opposite.”

The beauty of free trade is the following:

1. One can fully reimburse the beet farmers for their loss of a job with the money consumers save by being able to buy cheap world market beets. This is inherent in the definition of “efficiency” used by economists. Free trade is “efficient” because you can perform this reimbursement with money left over.
2. The argument for free trade does not rely upon _any_ benefit to _anyone_ outside the country. Those are just gravy. One can justify free trade _entirely_ from a nationalistic, selfish, point of view that it can make every citizen at least as well of and no one worse off than before. And I mean in terms of happiness, not just in terms of cash. If you don’t believe me then we’ll have Nate break out the supply and demand curves. In which case, we’ll need to add a blackboard function to this blog.

There are some caveats and so forth that can make trade barriers efficient, but they are _not_ ones you’ve talked about here. And they almost certainly do not apply to the beet market.

Frank McIntyre

April 8, 2004 at 9:40 am

EDIT — in my last post replace with the following in the obvious location:

“The key to free trade arguments is that the money saved in cheaper beets is always more than the money lost helping beet farmers change jobs….instead of subsidizing them through inefficiently high beet prices, you can just right them a lump-sum check (or the equivalent) which distorts no markets _and_ makes the beet farmer happy.”

Interesting: free trade as a component of redistributionist economics. That’s not an argument you hear every day. (More common is the decidedly non-populist claim that free trade is an imperative of our “long-term” overall economic health.) So, if I understand you correctly, you are suggesting that rather than sustain a particular (let us grant “inefficient”) socio-economic environment, we should just put the actors in that environment on the dole, more or less, until they get their act together and write off their former way of life and move on to “better” things? (And if they don’t?) It would be interesting to do a study of beet farmers (or steel workers, or any other economic subgroup whose livelihood has been devastated by open markets), and as them if they really would be “happy” with that economically non-distortive check. No doubt many would be, and I wouldn’t want to pretend otherwise. Heaven knows that there is just as much potential elitism involved in pontificating on the moral value of some embedded economic way of life as there is in subjecting all such ways to cool market analysis. But that strikes me as a solution that has already assumed there is only one way of framing the problem.

“One can justify free trade _entirely_ from a nationalistic, selfish, point of view that it can make every citizen at least as well of and no one worse off than before.”

Selfish, yes, most certainly. But nationalistic? No, not unless you have some wholly ideological and materially porous definition of the “nation” that I am unfamiliar with.

Kaimi

April 8, 2004 at 11:49 am

The thing is, as a general matter, it’s not that the farmers are getting subsidies and no one else is getting hurt. It’s that the farmers get subsidies, AND those subsidies come from our taxes, AND those subsidies keep American consumers from being able to buy goods at lower prices. It’s a money transfer from consumers to farmers.

Any time a more efficient industry arises, there will be jobs lost in the old, less efficient industry. When cars were invented, a lot of horse-and-buggy folk lost their jobs. Was this a bad thing? Probably for those horse-and-buggy folk; for the country as a whole, it was great, because people could all benefit from the more efficient product.

Who would’ve thought that a discussion about the sugar beet industry would turn out to be so interesting.

gst

April 8, 2004 at 12:27 pm

Kaimi is correct that it is a wealth transfer from consumers (everybody) to farmers. Also note that the hurt of this transfer is felt most keenly by the poor, whose food bill is a larger percentage of their total expenditures.

I like the idea of free markets, but I think some of the claims put forth here about the efficiency of free markets are a little overstated. Frank’s claims that free markets necessarily lead to Pareto efficient outcomes is based on formal models of efficiency but are not entirely grounded in empirical reality. We forget to add the mobility costs and information costs of adjusting to a changed economy to the efficiency equation. Displaced farmers, as Russell points out, may very well not rebound from loss of job and way of life. We take it for granted that they will but history indicates that real humans have a harder time responding to market demands than supply-demand curves would indicate.

Take for instance the case of the steel industry in the U.S. Sure, we all know that steel can be produced more profitably in other countries and so very few of us support the imposition of steel tariffs. However, we shouldn’t treat the dilemma of unemployed steel workers lightly. A few sociologists that I know at BYU have been studying the effects of job loss on former Geneva steel workers. Even though many of the laid-off workers were provided with education subsidies and some have been able to find new jobs shortly after the layoffs, the psychological and physical trauma caused by the transition to a new labor force has been extensive. Although I don’t know the actual numbers, a large percentage of those layed off suffer from depression and other health-related concerns that cannot be immediately treated due to lack of proper health care coverage. Their families also suffer the negative consequences of the transition.

My main point is that free market transitions often cause (unforeseen) negative externalities. This doesn’t mean that we should give up on the idea of a market society, but we should be a little less rash with our use of free market rhetoric.

Kaimi is correct in his discussion of a free market system. However, I will challenge his transfer of wealth methodology. Tranfer of wealth goes through a few more hands than from comsumer to farmer. Usually we as consumers are not buying direct from the farmer. There are brokers, distributors and wholesalers, then retailers that get in the middle of all those transactions. The guys in the middle are the ones who benefit from a free market system. In fact we have been discussing the possiblity of going into the brokerage side of our business. Instead of growing the product and processing it for retail consumers, we’re finding it makes us more money to broker the product to processors. Finally after 60+ years of being farmers, our company has figured out where the real money is made. In this (and here comes the bad news) we will probably put 130+ americans out of work, some of whom have worked for us for over 25 years. But that really doesn’t hurt anybody now does it.

“Also note that the hurt of this transfer is felt most keenly by the poor, whose food bill is a larger percentage of their total expenditures.”

Though “the poor” are no more a universal, indiscriminate, anonymous group than are “consumers.” Some of those poor are, in fact, the people whose jobs were lost through market competition, and thus consequently don’t have an income to buy food. So again, put the question into a broader context: is it really better to have cheap food and send the poor government checks to help them buy it, or have slightly more expensive food produced by people who can make a living and therefore are able to budget for it themselves?

” free trade as a component of redistributionist economics. That’s not an argument you hear every day.”

Russell: This argument is ubiquitous in economics and normative law and economics. The basic claim is that one can always use redistributive mechanisms to compensate the losers and make folks better off.

” But that strikes me as a solution that has already assumed there is only one way of framing the problem.”

Russell: I am at a loss to figure out what this is supposed to mean. You are going to have to spell out some substantive criticism of either the economic theory that predicts lost consumer surplus, or defend a vision of the world in which it is just fine to destroy (rather than redistribute) that value.

On the senselessness of sugar beets, let me refine the argument a bit. First, I am not actually certain if we ought to get rid of sugar beet production or not. Frankly, I don’t know enough about agriculture. I DO believe that to the extent that the industry exists (or exists to the extent that it does) because of legal barriers to entry by competition we ought to let it go. There are couple of reasons. First, I do think that a market structured by voluntary transactions is MORE just because of its voluntary character than is a market structured by government (ie people with guns) created barriers to entry. Second, proping up industries via protectionism makes everyone worse off. I am convinced by the magic of the moving supply and demand curves and that lost triagle of consumer surplus. Third, to the extent that protectionism is redistributive it is severly regressive.

“So…communal choice had nothing to do with it? A shared vision, a collective good, a common will? The only reason Mormon communitarianism experienced whatever success it did was because, for a couple of decades at least, the individual Mormons who crossed the plains didn’t have anyplace else to shop, literally and metaphorically? I guess that’s the consumer model for you. Again, it’s entirely possible that you’re correct.”

1. Communal self-determination may have been a necessary condition of the communal Deseret Zion but it was certainly not a sufficient cause. Of course, isolation was not a sufficient cause either — there was no Deseret in Montana. However, if your response to my claim that isolation was a necessary cause is simply to point out that there was another necessary cause, then as a good logician you are going to have to admit that you have failed to land a punch against my basic claim that the Deseret Zion existed by virtue of its isolation, even if it also existed by virtue of other things as well.

Historically, you may be correct that it was only the federal government’s coercion that was able to break the back of Mormon ideological coehesion, and that in the absence of that coercion the cohesion would have been sufficient to maintain the communal vision even in the absence of isolation. All I can say is that I am extremely doubtful. Admittedly, we are now involved in a complex, counter-factual historical debate. All I can say, is that I think I could win such a debate. In particular, I would point toward the failure of ZCMI, which was essentially an attempt to replace the barriers of isolation with the barriers of ideology. It worked for a time, but ultiately failed. Furthermore, I think that its failure had more to do with LDS consumption habits than with federal coercion. Of course, federal coercion may have alterted those consumption habits, but I think that a better potential causal agent would be falling transportation costs and rising income levels.

Your final point about universal v. particularized care is strictly speaking ad hominem. Here is how I would respond. While I do think that particularized care is more important that universalized concern, I don’t think that the priority of such a moral framework justifies particularlized care that throws unjustified cost on to others. Even if I have a greater duty to care for my immediate neighbors than for those who live far away, it does not follow that care of my neighbor that unfairly harms those who are far away is justified.

” but to wish to eschew them entirely is to wish for no barriers (social, political, economic, etc.) at all, and that means no collectivity whatsoever.”

Russell, this is simply an assertion of your preferred position that succeeds by implicitly dismissing all alternatives without adequately acknowledging or addressing them.

It seems that the alternative to communal barriers defined by isolation or coercion is to look at the possiblity of understanding them in terms of contracts. This is at least something that needs to be discussed before we assume the inevitability of particular “communal choices” and the costs that they place on others.

“is it really better to have cheap food and send the poor government checks to help them buy it, or have slightly more expensive food produced by people who can make a living and therefore are able to budget for it themselves?”

Russell: This way of framing the question ignores the basic insights of price theory that Frank was trying to explain. It is NOT simply a choice between “helping people help themselves” and “government checks.” It is a choice of “helping people help themselves” v. “sending them government checkes” AND increasing aggregate levels of social welfare.

Brayden: The presence of transaction costs and externalities does not constitute an argument per se for protectionism. One could just as easily argue that they simply justify larger post-barrier transfer payments (broadly concieved), better defined property rights, policies to reduce transaction costs (e.g. more efficient legal mechanisms, fewer controls on capital flows, etc.)

gst

April 8, 2004 at 1:11 pm

Whenever anyone tells you to knock it off with the free market rhetoric you can be sure that some obnoxious wealth transfer is underway.

Brayden, the negative externality you cite boils down to this: My life will be harder without the money the gov’t forces you to give me. No kidding. And my life is harder because I have to give it.

GST – That wasn’t my point. I think we need to think of better ways to ensure that our immediate labor force isn’t hurt by the opening of American products to imports (which by principle I am not against). We can start by ensuring that laid-off workers (or displaced farmers) have adequate health care coverage. Sure, this is a form of redistribution, but we are all likely to incur the costs of inadequate health care if something isn’t done about it.

gst

April 8, 2004 at 1:39 pm

I agree with you on that point, Brayden. An excellent step would be to somehow separate medical coverage from employment (while still keeping it private, I hasten to add). Tying health care to employment increases stagnation in the job market by creating terrible uncertainty in times of flux. And it puts an onerous governor on the engine of entrepreneurship.

“The basic claim is that one can always use redistributive mechanisms to compensate the losers and make folks better off.”

I don’t know if this claim is “ubiquitous”–in my experience, most of those who argue against collective economic arrangements are actually quite convinced that the lump-sum checks which Frank makes reference to do, in fact, have a distortive effect on the market (through altering labor patterns and engendering welfare cycles); they are willing to accept those effects as a way of insuring social peace, but rarely posit them as a justification (as Frank appeared to suggest) for free trade in the first place. On the contrary, most supporters of minimal-barrier economics (again, in my experience) take such a condition to be a more or less unambiguous good, and see compensatory checks a simply a necessary defense against populist complaints. Most redistributionists, on the other hand, begin from the other direction: social justice mandates a of social burdens, and given the particular social burdens of open markets, this is how we should go about redistributing wealth. But I guess this may be a meaningless distinction, since both approaches have by and large settled on a neoliberal consensus today.

“You are going to have to spell out some substantive criticism of either the economic theory that predicts lost consumer surplus, or defend a vision of the world in which it is just fine to destroy (rather than redistribute) that value.”

I suppose I would take the latter option, given that I don’t agree with the idea that fungible “consumer surplus” is something which should and will always automatically arise through all economic transactions, and thus must either be destroyed or distributed somehow. Why accept that the goods which are engendered through economic activity are necessarily consumer goods? Why can’t such productivity be manifest in social satisfaction, or non-consumptive properties? (Think of Hutterite communities: highly productive, yet without the accumulation of discreet goods to be either maximized or distributed or destroyed. More here: http://www.findarticles.com/cf_dls/m0254/4_59/68704398/print.jhtml .) Comparative advantage through specialization, with the consequence of the commodification of goods, is not the only economic game in town. (Yes, but are any of those games actually practicable? I confess I really can’t say. Perhaps not without intolerable sacrifices; perhaps innovations which have improved all our lives–medical technology, etc.–would never emerge if they were not first and foremost valued for the personal consumption. That would make for a strong argument for modern consumer-competition-based markets…but it wouldn’t, I think, justify presuming that such markets are natural, and that therefore cleaning up after them through redistribution is the only “sensible” way to talk about the problem of social justice.

Certainly cheap goods are to the benefit of many. But they also exploit the labor of many. Our desire for cheap strawberries makes it necessary (and profitable) for strawberry producers to depend upon undocumented laborers who, while certainly free to go elsewhere, find their choices constrained by the low-wage, marginal, insecure labor field they are likely to be dependent upon. The exploitation of migrant workers and the cheapness of the goods they produce isn’t a one-way street, but clearly the connection is real.

“Communal self-determination may have been a necessary condition of the communal Deseret Zion but it was certainly not a sufficient cause.”

This I will agree with–and to that extent, you’re right that it would be foolish of me to pretend that geographic isolation was irrelevant to Mormon communitarianism. Chalk one up for logic.

“Your final point about universal v. particularized care is strictly speaking ad hominem.”

Fair enough; I apologize for making my point in the way that I did. As for your response (“I don’t think that the priority of such a moral framework justifies particularlized care that throws unjustified cost on to others”), all I can say is that I think we have very different opinions about what kinds of costs are “justified,” and which are not…which I think goes down to very different ideas about what sort of goods can be plausibly pursued through economic transactions. Speaking broadly, fully aware of the many qualifications which would be necessary to turn this into policy, I do not believe that the pursuit of social democratic justice within the borders of a polity should be sacrificed in order to preserve and spread what I consider to be, perhaps wrongly, a (mostly) notional contractual relationship with peoples elsewhere.

“This is simply an assertion of your preferred position that succeeds by implicitly dismissing all alternatives without adequately acknowledging or addressing them.”

Again, fair enough. I concluded by doing what I accused you of doing.

Adam Greenwood

April 8, 2004 at 3:45 pm

Nate,
You concede that one can permissibly care more for the members of one’s community than the generalized mass, as long as I don’t do so ‘unfairly.’ What do you mean by this?

I suppose you mean that I can decide to patronize Mr. Near-at-Hand, instead of Mr. Faraway, even though Mr. Faraway’s goods are cheaper and he’s poorer. From the sound of it, I suppose you’d even accept it if we collectively did something like that on ideological grounds–we’d all have ‘Buy Near-at-Hand’ bumper stickers and shame and exhort each other. What if we realized that the flesh was willing but the spirit was weak, and agreed beforehand not to buy Faraway and to enforce that decision? What if, instead of all agreeing, we only used our routine mechanisms for community decisonmaking to do it, realizing that a good portion of the population didn’t give a hoot for Faraway or Near-at-Hand and just wanted the cheapest goods, everything else be damned? Where along this continuum do you draw the line, and why?

Or do you reject my hypothetical altogether? Perhaps you’re really concerned with some sort of utility balancing in which we weigh the social goods that the Grey Fox talks about against the economic gains. Or perhaps you really feel my entire protectionist model is wrong, that tariffs and so forth are always organized by the Mr. Near-at-Hands themselves who take advantage of the rational apathy of the community. There is a large truth to that–the Old Adam is always with us–but many citizens are instinctually protectionist simply because they care more about their fellow citizens and their existing matrix than they do about foreigners. So again I have to wonder when these protectionist instincts are fair in your opinion and when they are not.

Adam Greenwood

April 8, 2004 at 3:48 pm

Let us all agree to tread easily when it comes to arguing with the Grey Fox. He is that rare individual who can be persuaded by argument and who will admit error ungrudgingly. This is to be encouraged.

Frank McIntyre

April 8, 2004 at 3:53 pm

Sorry I don’t have more time today because the discussion is good. But a few points (some of which were probably already made):

“selfish, nationalistic” == in the interests of the nation’s citizens, ignoring any value to those outside the country. Sorry for the confusion.

“lump-sum” == no conditioning on behavior, thus they may wish to stop work because of the money, but if the amount is that large then this must be a really inefficient program… Welfare requires that you work only a little or not at all. Encouraging non-work and dependency. Lump-sum is a single one-time check/transfer. There is no behavior distortion.

But don’t get hooked on the lump sum idea. Any redistribution scheme could be used. One could modify Joseph Smith’s idea about paying off slave -owners into price breaks on buying the beets land, or a payment that rose with work (such as the EITC), or whatever. If carefully done, these could all be managed in ways that distorted markets in very limited ways and achieved the redistribution. That is far from the crucial point. The crucial question is “will there be enough money to do it”? The answer is yes, there will.

Geneva steel farmers fared poorly after their plant closed. Well, then perhaps the transfer subsidy wasn’t enough. So, if closing the plant was the right move, either increase the subsidy (which could partially take the form of health care), or recognize that this sort of thing is a risk faced by everyone due to boring old domestic competition and/or technological change. If we should help unemployed people, fine, but don’t single out the beet farmer as somehow specialer. If you aren’t careful you will soon be advocating breaking windows to employ glassmakers and outlawing the sun to employ the candlemakers. The arguments, you will find, are economically much the same as that for tariffs.

Does economics contain a redistribution element? Absolutely. Do many people who take 1 econ class miss this concept? Absolutely. The redistributional _possibility_ is an essential part of the definition of economic efficiency. But no one says you have to actually DO the transfer, just that you can. Oftentimes, we don’t do the transfer. There are good reasons why this might not happen. Why does the beet farmer have a right to job security that millions of Americans lack? Why the arbitrary preference?

Sometimes people act as if economists mean “make money” when they say “efficient”. That would be a loser definition of efficient. When an economist says efficient, they mean Pareto Efficient, which means exactly the following:

“An outcome is Pareto Efficient if no one can be made better off without someone being made worse off”. So “A Pareto Improvement is one where I can make someone better off and no one worse off (given transfers)”. Where “better off” means happier not just richer. Under a wide variety of assumptions, free trade is a Pareto Improvement over a subsidy.

This means that COMPARING HOW MUCH YOU LOVE MR. NEAR-AT-HAND AND MR. FARAWAY IS IRRELEVANT. You do not have to care a dime about MR. FARAWAY and you could love MR. NEAR-AT-HAND and you should still not impose a tariff. Instead of writing checks to MR. NEAR-AT-HAND through the price of beets, which is distortionary, write them through some other, less distortionary system. Now I have no idea why we are writing this guy checks in the first place, but we’ll run with it… This will make EVERYONE in the country better off. It will also make MR. FARAWAY better off, but this is not required to justify free trade (though I think it is an excellent form of development aid).

I have to go but cheers to all.

Frank McIntyre

April 8, 2004 at 4:01 pm

I should also mention that the income effect of a lumo-sum tranfer is also a non-issue because this is largely just income the person would have received anyway through the beets tariff transfer.

Adam Greenwood

April 8, 2004 at 4:04 pm

This was addressed to Nate, who conceded that we could care more about our neighbors and our relations with them than we do the general mass. It sounds like you make no such concession, or that if you do you think our caring for them should merely take the form of caring for their economic wellbeing.

Adam, I consider that to be a truly great and humbling compliment. Thank you. (And your quick breakdown of the complications inherent in easy anti-protectionist rhetoric, via Mr. Near-at-Hand, Mr. Faraway, and the question of enforcement, was superb. I’m going to have to steal it and use it in a class one of these days.)

Frank: It seems to me that you use both the concepts of Pareto efficiency and Kaldor Hicks efficiency (ie potentially Pareto efficient). Indeed, I don’t see why would care — for example — if the destruction of a monopoloy is Pareto inefficient, so long as it is Kaldor-Hicks efficient.

Frank McIntyre

April 8, 2004 at 4:10 pm

Adam, I actually claim that relative preferences for those near and far is irrelevant to free trade. That the efficiency I claim entails increases in actual, honest-to-goodness happiness, not just income for everyone. This is related to the definition of efficiency I use, which is based on heappiness, not “economic well-being” by which presumably you mean money and stuff.

Adam: Here would be a response. I think that one is justified in giving of your substance to your neighbor who is in need, rather than sending it abroad to Mr. Far-Away. I am even fine with people contracting in favor of Mr. Near-at-Hand. (Provided I can make lots of provisos about the contract). I am less certain about our “matter of course” communal decision making aparatus. It is important to remember that as much as communitarians like to invoke ideas like “the feelings of the community” or “the general will” that there is a difference between the actual unanimity of a real collective contract and non-unanimous decision of some collective decision making. Furthermore, as Frank correctly points out so long as one uses a criteria of Pareto improvement, you need not make ANY trade offs betweeen Mr. Close and Mr. Far Away.

As for what it means to “unfairly” burden another, let me give you some examples. Suppose that I helped my neighbor by expropriating the property of people in developing countries at gun point and giving it to my neighbor. This strikes me as unfair. Suppose that I help my neighbor by using the state to destroy the livlihood of someone else. This seems unfair.

Frank McIntyre

April 8, 2004 at 4:19 pm

Nate, we care if we have the monopoly :)

You are right though, many things that are efficient are probably a good idea even without the redistribution.

Adam, the Mr.-Mr. example was very clear for which I’m grateful. The protectionist argument for collective action is fine but is basically a public goods argument for collective enforcement. So why not be efficient in the public good of helping this arbitrary group? Use better means than protectionism, the costs of which are born regressively and, as a welfare scheme, provides less bang-for-the-buck in helping this arbitrary group. Surely you don’t favor regressive taxation?

Russell: I think that you are misunderstanding by what I mean by consumer surplus. This does not mean something like “surplus consumer goods,” which seems to be your implicit assumption. As I understand it — and a real economist like Frank can correct me if I am wrong — consumer surplus is the difference between what a consumer would be willing to pay for a particular good and what they actual pay. If I would pay $5 for a widget and I only have to pay $3, then there is $2 of consumer surplus. The problem with protectionism is that given some reasonably plausible assumptions (downward sloping demand curves and upwardly sloping supply curves), protectionism increases the “producer surplus” (the difference between the minimum price at which a producer would make a good and the price that he actually gets in the market) by less than it reduces consumer surplus. The result is a dead weight loss.

Note, there is no reason that this loss need be denominated in terms of dollars, or good, or what have. For example, if I pay $5 for a unit of food rather than $10 for the same unit, it hardly follows that I will either consumer twice as much food or pocket $5. I may well decide to work less, spend more time with my family, and sit around reading German philosophy.

cooper

April 8, 2004 at 4:31 pm

If you have the access to the LA times articles, there is an excellent example of the discussion above. In fact the journalist just one a Pulitzer for the articles written about WalMart. It is excellent.

Frank – until the government decideds farming is no longer a “natural resource” we will have subsidy program in effect. That is a key issue to the Mr. Near-at-Hand vs Mr. FarAway argument.

Frank McIntyre

April 8, 2004 at 4:46 pm

cooper: Well if you mean that it is something we must produce to preserve national security than we are a long way from that problem. I think American farmers are actually quite competitive in some industries, though I don’t know enough to say for sure which ones. But beets as a national security issue???

If you meant something else by natural resource, then I’d be interested in knowing what you are thinking. If your argument is more generally that we will always have subsidies because of politics, I really have little to add. You are likely correct. A redistributionist mindset though, such as I outline above, might be a way to get around that. But probably not.

cooper

April 8, 2004 at 5:46 pm

No, actually the USDA, thus the federal gov’t., looks upon farming as a natural resource. Quirky but true.

“I think that you are misunderstanding what I mean by consumer surplus.”

I did misunderstand; while I stand by what I wrote, I see that it didn’t speak to the point that you were making. That said, I’m not sure I could speak to the point that you (and Frank) were making. I must admit that “consumer surplus” makes about as much sense to me as Hegel’s Volkgeist probably does to you. Say I am, on some conceptual level, willing to pay X dollars for a certain good, yet I obtain it for only X-2 dollars. That means there is…what, exactly? 2 dollars worth of “willing” floating around, waiting to be made manifest? I guess I understand the principle, but it seems an odd thing to attach any normative weight to. Suppose I love my wife so much that I’d be willing to clean Grand Central Station with my tongue for her. Yet, she only requires me to clean the bathroom with a scrub brush in order to reciprocate my love. That would, well, leave a whole lot of “love units” unaccounted for, right? (A “dead weight loss” is how you put it.) Maybe I could spread those around to other women? (“Hey, I’ve got so much love to give!”) Or should I be concerned that I’m exploiting Melissa, allowing her purchase my love so inexpensively?

Yes, I know, it’s a farcical example; there are all sorts of ways to explain the category differences between emotional goods and material goods. Still, I’m not sure that my fundamental bemusement about the concept isn’t broadly applicable. I suppose the genius of capitalism, of the commodification of labor, is that it allows intangibles like “consumer surplus” to be structured into programmatic exchanges. I wouldn’t want to deny that it “works,” broadly speaking. But I’m doubtful the alienation which follows is necessarily worth it.

Frank McIntyre

April 8, 2004 at 7:42 pm

Your example with your wife is great!

But it entails no deadweight loss. Because your gain is your wife’s loss (assuming she values such a thing). That is bargaining and shows up in much more mundane examples.

Deadweight loss is when my loss is _no one’s_ gain. This is bad. Because If I am going to lick Grand Central, I require as a minimum that somebody gains some value from seeing it.

Your question about what these “love units” or floating dollars are is an excellent one and is the principal subject of a standard intermediate price theory class. One can describe these “love units” in any number of ways. One can even translate them into a certain number of dollars, but that number of dollars would depend on my income. Essentially it would be the number of dollars you’d take in exchange for that number of love units, which would vary with income.

We use the word “utility” for it, and it has no natural set of units. It is a well-defined concept that allows one to determine deadweight losses and talk about what is efficient. It can’t be compared across people, but one can still establish Pareto Efficiency.

“Utility” models can easily incorporate ideas about alienation, affection for others, love of trees, sunsets, chocolate, self-respect, and anything else you want to make part of one’s happiness. Thus it is a very flexible concept.

The issue of whether you are “exploiting” your wife is interesting. Figuring out exactly what the term means is awfully difficult. The paper on the concept of voluntariness in contract law that I sent you was my attempt to get at some of these sorts of questions. I am still VERY interested in hearing what you might have to say about it…

Russell: Imagine the situation of a grocery store that could perfectly price discriminate against you. For example, you would be willing to pay a very large sum of money for the first loaf of bread, without which your family and you would starve. Your willingness to pay would decrease with the second bit of food and so on. If there was no competition and the grocery store had perfect information about you, then it could price every good so that you would be paying the maximum amount that you would be willing to pay for that good given your circumstances. It seems to me that this is much less desierable world than one where you can go to the grocery store and pick up food at a reasonable cost, and go to the grocery store down the street if prices are too high. The difference between these worlds is the difference between a world where you have virtually no “consumer surplus” and lots of consumer surplus.

Russell: One way of thinking about the idea of “consumer surplus” as a normative concept is to see it as an expansion of opprotunities. The fact that you needn’t lick Grand Central Station to get your wife’s love means that you get to have a richer life full of a greater array of options and possibilities. You attach normative significance to it, because it represents an increase in human flourishing. The point of the economic argument against protectionism is that it completely destroys some of these expansive opprotunites without transfering them to anyone at all.

Frank: So you have argued for Pareto superiority as a valid normative criteria because you have an inclusive utility function that includes honest to goodness happiness. How do you respond to an aretic critique of your argument that says that the satisfaction of desire is not per se normatively desirable. What we care about is whether or not we have virtuous desires.

Assuming that you respond that unvirtuous desires are simply the result of information problems — people don’t know what will really make them happy — then I have two questions. First, is this position reconcilable with the notion of the fall. Second, what notion of “happiness” are you using that is independent of preference satisfaction?

“‘Utility’ models can easily incorporate ideas about alienation, affection for others, love of trees, sunsets, chocolate, self-respect, and anything else you want to make part of one’s happiness. Thus it is a very flexible concept. It will do your laundry! It’ll watch the kids! BUY YOURS TODAY!!!”

Can it save my soul? How would the utility model interpret the atonement? As a spiritual consumer, I don’t want the value of my choice to go to waste.

Nate:

“I am still VERY interested in hearing what you might have to say about it…”

Nate says:
“Imagine the situation of a grocery store that could perfectly price discriminate against you. For example, you would be willing to pay a very large sum of money for the first loaf of bread, without which your family and you would starve. Your willingness to pay would decrease with the second bit of food and so on. If there was no competition and the grocery store had perfect information about you, then it could price every good so that you would be paying the maximum amount that you would be willing to pay for that good given your circumstances. It seems to me that this is much less desierable world than one where you can go to the grocery store and pick up food at a reasonable cost, and go to the grocery store down the street if prices are too high. The difference between these worlds is the difference between a world where you have virtually no “consumer surplus” and lots of consumer surplus.”

Actually, the framework that Frank describes (i.e. Kaldor-Hicks) does not prefer either of these worlds. If the monopolist can perfectly price discriminate, then your lost consumer surplus becomes his gained producer surplus, so it’s a wash. Monopolies are only inefficient if they CAN’T price discriminate (this may be counter-intuitive).

ed: the example was not meant to illustrate efficiency but merely why consumer surplus is desireable at all. I freely admitt that I don’t know much about the economics of monopolies, so I am willing to be persuaded as to your price discrimination point.

Russel: it might warm your communitarian heart to know that consumer surplus arguments can be used to justify government actions as well!

Take the example of a new subway. Assume the subway costs $1 million per day (amortized) to build, and each additional rider raises operating costs by 25 cents per day. Say there are 1 million people in the city. Assume that 500,000 of these potential users would be willing to pay $2 per day to ride and the other 500,000 would be willing to pay only $1. The free market can’t build this subway: any price they charge for tickets will not make back their investment and pay the operating costs.

However, if the government just taxes everyone $1.25 per day and let everyone ride free, it can pay for the subway. Half the people gain 0.75 consumer surplus and half the people lose 0.25 consumer surplus per day. Because total net consumer surplus comes out positive, this project satisfies the Kaldor-Hicks criterion: we could potentially have all the gainers pay 0.50 to the losers, and both would be better off. (This is what consumer surplus is really about: the idea of “willingness to pay” captures whether it would be possible to make these side payments that would make everyone better off. The idea that some people are “willing” to pay $2 indicates that they would be even more willing to pay $1.25, plus another $.50 to the losers.)

In this case and many others, we probably can’t identify the gainers and losers. But if we consistently apply this criterion for all decisions, most people will be gainers sometimes and losers sometimes, and most will end up better off.

Frank McIntyre

April 9, 2004 at 12:19 am

Ed’s right about perfect price discrimination, but Nate’s example is an excellent one for thinking about consumer surplus.

“How do you respond to an aretic critique of your argument that says that the satisfaction of desire is not per se normatively desirable.”

I don’t. I can guess what aretic means from the context. As I said in the post on gossip, if one separates observed actions from happiness, one can no longer draw any welfare implications. Actions and happiness in the case of gospel principles will often be off. And here you can use faith as your probabilistic assessment of the likelihood that gospel living carries net benefits. As faith rises, behavior conforms to what God says will make us happy. Those who lack faith, which here is manifested through works, don’t do what makes them happy.

That said, In this context I don’t see any justification for the idea that the government knows better than the beet farmer and so should force tariffs on him. If we can set up a system that causes him to forego the tariff at prices we are willing to pay, everyone is making a free choice that produces cheaper beets. I can think of no platonic good to higher priced beets, so I defer to the choices of agents.

So Russell, given the above, if you wish to assert that you know better than everyone else what will make them happy and you wish to override their freely made choices to impose their happiness, feel free to ignore my arguments about free trade. I didn’t mention this earlier because you would probably not find it very satisfying as a philosophy of life and the Gospel.

Speaking of the gospel. let me discuss the atonement. This is a sacred subject, so I’ll refrain from flippancy, but the application is straightforward. God cares about our happiness deeply. He wished to institute a massive transfer to us. That transfer, the atonement, overcomes the terrible fixed cost of the fall and gives us the possibility of “working out our salvation with fear and trembling”. It had to be paid for by someone and we know who that was. The cost was incalculable—

“Therefore I command you to repent—repent, lest I smite you by the rod of my mouth, and by my wrath, and by my anger, and your sufferings be sore—how sore you know not, how exquisite you know not, yea, how hard to bear you know not.”

But once paid, Christ is ready to institute transfers to us conditional on repentance. The gospel says that the highest utility is found in doing what God commands. If you do that, Christ transfers to you the ability through him to reach the highest attainable levels of utility/happiness. Thus utility maximization is perfectly competent to let us organize our thoughts about the Gospel. Because utility maximization is just a formalization of making choices, which is the essence of the Gospel.

Frank McIntyre

April 9, 2004 at 12:25 am

ED!

I hear you are on your way. By the way, where are you on your way to?

Russel: in case it wasn’t obvious, Ed’s perfectly correct example of public action arises because of an industry with low marginal costs but high startup or fixed costs. It is the justification for having one utility company, one subway, one set of roads, etc. So now that you know consumer surplus is not just a tool of the capitalist aggressor, you can come join the dark side.

cooper

April 9, 2004 at 12:42 am

Frank, good ending to a great discussion!

Frank McIntyre

April 9, 2004 at 12:42 am

A clever student of mine suggested today a way of making transfers that is not only efficient but should clear up some misconceptions about the efficiency argument.

1. Abolish the tariff.
2. To each _current_ beet farmer, assign a transferable property right to a stream of income. Each year they receive a check for the difference between the new beet price and what the price would have been under the tariff (pretend we know this value, we can argue about it later). This value is multiplied by some estimate of what their “average production was in some number of years before step 1. The check _does not_ depend on actually producing any beets. It is a transfer that does not depend on anything the farmer does.
3. If desired, the checks can have a termination date, or a gradual phase-out range, or stop 10 years after the death of the farmer, whatever.
4. The right is fully transferable to others, and is not tied to any production of beets, work effort or anything.

Now if the farmer wishes to keep on producing beets, the checks ensure that he is in _exactly_ the same economic position as before. Thus you can no longer argue that he is worse off, because he has the choice to do exactly what he was doing before. But if he wishes to quit farming, he can do that. If he wishes to cash in his property right for a big check, he can do that. It is all up to him. Consumers are better off because they get cheap beats, which saves them more than they have to pay in checks to beet farmers. Third World Farmers are better off (as long as their government doesn’t confiscate the gains).

Note that this is the _exact_ _same_ dole the farmer was already on in amount—a price subsidy. But now it is no longer tied to inefficient production of beets. It does not discourage the farmer from working because they can still work and receive wages commensurate with their abilities. They can do this farming beets if they wish, but if they will make more doing something else, they are now free to pursue that alternative. The old subsidy only applied if they made beets, which they couldn’t do as well as others. The new subsidy lets them choose.

Ed, thanks for that example of surplus thinking; it was very helpful to me. Frank, a few notes:

1) I’ve no desire to be flippant about the atonement either, but I have to ask: do you really think that “making choices…is the essence of the Gospel”? If so, I suppose that the language of utility truly is applicable to our relationship with God. I just don’t think that’s true however. Righteousness is the essence of the good news, the reception of grace, the salvation of God. Is choice necessary to that condition? Of course; I hardly want to minimize the role of the will. But the sort of choice which the scriptures seem to describe does not, it appears to me, to be one which attaches any significance to the interest or the calculation of the chooser. That is, the simple fact of making choices is not an empowering condition; rather, it is structural one, concomitant to our life in a fallen world where we are “enticed” one way or another (to use Lehi’s language). Perhaps this is a small point, but I think it looms large insofar as it reveals our basic perspectives on the relationship between God and man.

2) “If you wish to assert that you know better than everyone else what will make them happy and you wish to override their freely made choices to impose their happiness, feel free to ignore my arguments about free trade.”

Odd, I didn’t know I was arguing that. Indeed, I thought I was talking about–I thought this whole thread was talking about–the longing of actual distinct persons (whether 19th-century Mormons or contemporary beet farmers) to perpetuate a socio-economic activity which they desired on some level or another in face of the lure and demands of liberal economics. If I’m guilty of conceiving of a condition wherein certain decisionmakers (let’s pretend that’s me) are empowered to override the consumer preferences of certain individuals for the sake of some vision of collective happiness–and for you to assert such I think rather cheaply elides the important observation Adam made about the presumably legitimate role which governments and majorities can and must hold in free societies to enact decisions–then let’s at least also acknowledge that your critique of such involves the conceiving of a condition wherein certain decisionmakers (let’s pretend that’s you) are empowered to override the lifestyle preferences of certain individuals for the sake of cheaper cars, cheaper sugar, and so forth (and perhaps not entirely uncoincidentally, greater profits for those with prior possession of the capital means to structure the manufacture and sale of such goods).

3) Your student’s example of how the tariff could be replaced with a carefully constructed redistributionary scheme without any impact to the sugar beet farmer was a very thoughtful one; thank you for sharing it. In an important way, it represents a shift from a Rawlsian, ex post distribution (which would be strict compensation for the loss of their sugar beet niche) to a more Dworkian, ex ante arrangement (since the transfer would not, in fact, be dependent upon anything the farmer did, it would structure the range of choices which the farmer would hypothetically face so to be same as those he would have faced prior to market transformations). I like it, and might well support it. But I’m not satisfied with it, because like any other liberal arrangement it fails to acommodate the possibility that a condition of goodness or virtue or worth might obtain in the activity or the ends of the activity itself, rather than merely in individual preferences for such. This comes through when you make it clear that the payment would go only to current beet farmers; there is no provisio in the arrangement for the collective perpetuation (i.e., for future generations) of an industry which may be good on its own terms. (Think about French Canadians efforts to preserve their language in Quebec through the establishment of numerous barriers to the free choice–which should presumably be legal on federal law in bilingual Canada–of English throughout the province. Their stated goal is not to preserve the range of options which ought to be available to French speakers otherwise surrounded by English-language majorities; their goal is to preserve French itself.)

The difficulty with arguing about communitarian arrangements–whether 19th-century Mormon or contemporary American ones–from an economic point of view is that, by definition, such arrangements have non-economic (theocratic in one case, populist in another) aims in mind.

Russell: In your initial response to my post you dismissed my point about BY and Wilford being unwilling to use violence to protect their Zion as being rather “rich.” I thought this was a bit too glib a dismissal of my point. I think it significant that faced with the loss of the barriers created by isolation, BY et al were unwilling (although perhaps they were simply incapable) to recreate those barriers using the mechanisms of collective violence. I am wondering why you seem unwilling to draw more normative significance from this fact.

Russell: I am confused by what you mean in your las post when you talk about “economic” and “economic” aims. By “economic” do you mean something like commerical, or by “economic” do you mean something like “modeling human choice using a rational actor model in the face of scarcity”? I don’t quite understand if you are making a methodological point about the usefulness of a rational actor model for understanding society, or are you making some sort of anti-commericalism point about the limits of using financial incentives to evaluate things.

“perhaps not entirely uncoincidentally, greater profits for those with prior possession of the capital means to structure the manufacture and sale of such goods.”

Russell: Are you honestly accusing Frank of espousing free trade because he profits personally from it? BTW, the claim that free trade increases the profits of those with prior possession of capital means is exactly wrong. Competition tends to drive the price of goods down to marginal cost of production, which implies that the return to capital gets pushed down toward the natural interest rate. Free trade facilitates this competition. If you want to protect the profit margins of capitalists, shield them from competition. You were on more solid ground when you were talking about the communal value of languages and such. Once you start wandering off into populist economics, you are going to have to provide some real economic arguments.

Russel writes: “This comes through when you make it clear that the payment would go only to current beet farmers; there is no provisio in the arrangement for the collective perpetuation (i.e., for future generations) of an industry which may be good on its own terms.”

Ah, so it’s not just the beet farmers themselves, it’s the entire beet farming way of life. Beet farming as an institution may be so important that we might want to use tax money to bribe the farmers to keep it going.

If this is really the argument you want to make, it’s pretty hard to argue against it, so I guess you win. Before you go down this road, though, consider that there may be many other valuable endeavors and like schools and museums, even other types of farming, that will be competing for limited resources, so make sure you think the beet farming institution is really a high priority. You might also be concerned that the institutions that will end up getting subsidized are the ones who’s members have political power/skills/connections. This may be a valid practical reason for just opposing subsidies in general.

Of course, if God is personally in charge of the subsidies, I guess that’s ok.

On a lighter note, here’s a picture of the legendary bar band “The Beat Farmers,” who managed to entertain audiences for several years despite a complete lack of government subsidies.http://sdam.com/artists/bf

“I think it significant that faced with the loss of the barriers created by isolation, BY et al were unwilling (although perhaps they were simply incapable) to recreate those barriers using the mechanisms of collective violence. I am wondering why you seem unwilling to draw more normative significance from this fact.”

To be sure, there is some real significance to the fact that the creators of the 19th-century Mormon Zion were unwilling to resist attacks upon it to the ultimate extremity; indeed, as I wrote in a post some time ago (here: http://www.timesandseasons.org/archives/000185.html ), I think it’s both curious and challenging to reflect upon the fact that Mormonism, in a moment of crisis, found divine approval not in resistance but in adaptability. If I was too glib–which I shouldn’t have been–it was in reaction to a (perhaps unfair) reading of your original post, which seemed to me to suggest that the question of violence arose naturally, internally (“Hey, the order keeps breaking down; what are we going to do?”) Obviously you’re not wrong to highlight the many ways it did break down internally, and that simple isolation was at least as much on the side of the prophets as collective desire; but I thought it important to balance that by emphasizing the degree to which the greatest challenges Young & Co. faced arose from external and contingent factors, not ones necessarily inherent to the system itself.

“I don’t quite understand if you are making a methodological point about the usefulness of a rational actor model for understanding society, or some sort of anti-commericalism point about the limits of using financial incentives to evaluate things.”

More the latter than the former, though obviously I think there’s some overlap there.

“Are you honestly accusing Frank of espousing free trade because he profits personally from it?”

No, of course I’m not. (Frank, please ignore that “perhaps not entirely uncoincidentally” bit from my post last night; that was a late-night snark, and not a defensible one. My apologies.)

“Competition tends to drive the price of goods down to marginal cost of production, which implies that the return to capital gets pushed down toward the natural interest rate. Free trade facilitates this competition.”

At this point, you and Frank can cite your hordes of preferred economists and commentators to argue free trade orthodoxy, and I can cite my hordes of economists and commentators to make the anti-globalization case. I’m quite certain you’ll win (your argument has in the real world–behold NAFTA, the WTO, etc.–so I don’t see why it wouldn’t here either). But for whatever reason (bull-headedness, I suppose), my side of the argument doesn’t seem to go away, and keeps asking questions like: if free trade facilitates the sort of competition by which the cost of production is driven down, why has capital-accumulation and productive capacity continued to be concentrated in the hands of economic elites–indeed, why has that concentration accelerated over the decades as markets have opened? Please note: I’m not denying that the world in general is materially more wealthy. I’m wondering why contemporary competition, which you present in terms of barrier reduction (and thus presumably in participatory terms), so often appears to take winner-takes-all forms.

“You were on more solid ground when you were talking about the communal value of languages and such. Once you start wandering off into populist economics, you are going to have to provide some real economic arguments.”

Which I confess I’m not likely to do a very good job at (as I said above, the best I could do is just call up all my preferred experts and watch you guys bat them down). But would like to argue that moving from “communal value[s]” to “populist economics” isn’t a “wandering”; on the contrary, as this whole thread (which began with a look at the intellectual and moral legacy of the sugar beet in Mormon thought) I think makes pretty clear, they are inextricably tied together, a fact which is ignored too often by culturally concerned thinkers on the right (who don’t acknowledge the threat which the free market can and often does pose to the preservation of communities) as well as by economically progressive thinkers on the left (who don’t recognize that the social justice they aspire to depends upon the maintainence of civic values and identities).

Finally, Ed:

“So it’s not just the beet farmers themselves, it’s the entire beet farming way of life….Before you go down this road, though, consider that there may be many other valuable endeavors and like schools and museums, even other types of farming, that will be competing for limited resources, so make sure you think the beet farming institution is really a high priority.”

You’re absolutely correct. In case it hasn’t been clear, let me state it plainly: I don’t have stake in or commitment to beet farming. For all I know, it is SO economically distortive that its preservation makes it impossible to fund dozens of other more important collective goods, and thus simply can’t be defended. Moreover, maybe the beet farming way of life itself is an ugly one, dependent upon exploitive labor practices, teaching crummy values, ruining the environment, debasing our health through the consumption of inferior sugars, lining the pockets of beet magnates, etc. I honestly don’t know. All my arguments, to the extent that they’ve been on target and haven’t gone astray (and no doubt many of them have), have been about clearing a space for and sustaining a language appropriate to communal economic principles, not about defending any one specific application of said principles. Is the fact that many communities are bad a standing argument against subsidies in general? It might be if the alternative–open markets–were just a default position that we all naturally occupy, from which all collective concerns are deviations. But I don’t think that’s necessarily the case.

This will probably be my last post on this topic, at least for a while; I won’t have much time today. Tear my arguments apart as you think best; I’ve learned much from arguing with you all.

Adam Greenwood

April 9, 2004 at 11:06 am

I think Frank’s clever student has made clear the differences in thinking, here. The student is satisfied with a subsidy because, looking at everything from the perspective of the economic individual, the farmer should be just as happy to take his check and let his fields lie fallow. If he feels himself to not be contributing enough, he can go do volunteer work or raise a big garden or something.

But I see that subsidy as crippling and insulting in the way giving one’s patronage isn’t. Can you really go to your neighbor and tell him that you don’t really want to do business with him but you will send him a check? If your brother takes up life insurance, can you tell him that all in all you’d rather make your own arrangments but here’s a handful of $20s? You’re ignoring what it is to be mutually interdependent, to have friends and neighbors and to be part of a people. Sure, this is a fallen world, where very often we have to sacrifice good and great things because we can’t keep them up. Things change, whether we will. But we don’t have to embrace change headlong, dancing madly on the grave of the past.

It was fun discussing with you, and I hope you don’t feel bad that we all ganged up on you, and that you alone had to defend the noble beet farmer against the greedy, soulless free-traders. I realize you aren’t even necessarily in favor of subsidies, you’re just against the uncritical assumption that they’re always a bad thing. And I suppose you’re right to be skeptical (although in this case I’m still pretty convinced that beet subsidies are a bad idea).

Unfortunately you are probably doomed to undergo many more arguments with economists in the future, so hopefully this discussion has been somewhat helpful to you in that regard. In the future, I hope you can explain more about your theories about “exploitation” and “alienation.”

Here’s a quote from a conversation I had years ago:
ME: The newspaper printed the Unabomber’s manifesto. He says the industrial revolution was a huge mistake.
ROOMMATE: He might be right, but what are you gonna do about it now?

Adam: This is an interesting point. Why is a collectively appropriated cash subsidy morally crippling, etc. while a subsidy created through a collectively imposed barrier to competition is not. Either way, the beet farmer is getting money via government action that he would not otherwise be entitled to.

Adam Greenwood

April 9, 2004 at 11:47 am

Do you dispute that there is a difference? What about the frequent case where, after the kids are gone, a husband will set up his wife in a little business that she runs for profit, true, but less than could be got if the money were invested and the return given to her.

Kristine

April 9, 2004 at 11:56 am

Um, Adam, could you choose a slightly less condescending example and/or tone? Please.

Frank McIntyre

April 9, 2004 at 12:00 pm

Russel: I never thought you were claiming me to be a free-trade profiteer. I also misspoke when I said “the essence of” when I should have said, “choice is an essential part of.” On your second point, I don’t think you hold the view in the quote on overriding people’s choices, I was presenting it as one justification for ignoring rational-choice models in general. I should have been clearer and written better.

On the third point, Adam and Ed make clear some excellent points on this topic. The farmer is free to continue farming beets into perpetuity, with no loss of income. We could deny the transfer and they are still free to pursue their preferred vocation, but with less money in their pockets. We all sacrifice money for things all the time, this is no different unless one wishes to assert, as Ed points out, the Platonic Goodness of beet farming, which no one here really does. The beet farmer sans transfer would still be better off than his 19th century counterpart, just not as well off as if he did something else (which he is free to do if he chooses). This is the same as someone choosing to teach at a university or a public school instead of going on Wall Street; a choice that maximizes utility, not income.

On Adam’s point, there are many differences between a check in the mail and a law increasing the price of beets. There are also many similarities. The law, we have established, distorts markets. The check insults the farmer. But the law should also insult the farmer, because it is really just a check. The disgrace of the check is _not_ the fact that beet farmers hate money. The disgrace is partly that you are on the dole wherein the government is taking money from other people and giving it to you. The law is no different in this respect. The tariff takes money from other people and gives it to you. The disgrace is also because the money is not “earned.” This is a valid reason to feel disgrace. But the extra money you make selling those beets at tariff prices is also not earned. It comes to you precisely because of the government’s guns and prisons enforcing the law. If the government gave the farmer a beet monopoly so he could make a fortune, that monopoly price is not “earned”. It is confiscated from consumers just like the tariff. If the farmer is unaware of all this, then they are not insulted, but we have insulted them by treating them as children to be shielded. I find that unacceptable, you may disagree.

The husband-wife example is fine, but this is not unrelated to the fact that it involves no guns and prisons. If private individuals wish to “support their local farmer” I have no opposition, though I personally prefer to support my distant yet _far_ poorer farmer. People can do things that make them happy yet don’t maximize income. That is very different from imposing a tax.

Frank McIntyre

April 9, 2004 at 12:06 pm

Russel: The arguments you wish to make are not actually well defended by this example. When you are old and gray and have free time, you should pick up an intermediate microeconomics textbook and learn about “public goods”, “externalities”, and “social complementarities”. That is the bulwark upon which to make your stand against the armies of hoarding free-marketeers. Your language example would fare better because it can be linked into public good analysis. This is also where Ed’s example comes in. Beet farmers are not a aren’t a particularly good place to think about such ideas.

Frank McIntyre

April 9, 2004 at 12:12 pm

Bytheway Adam, the farmer needn’t let his field lie fallow. He is free to raise beets _because it makes him happy_ even though he could earn a better return elsewhere. He is free to get another job (which many would). The land would be used for something, though maybe not beets unless the farmer really liked beets. The farmer would likely still work doing something, perhaps beets, perhaps something else. The check will not change that.

Adam Greenwood

April 9, 2004 at 12:47 pm

I apologize for the tone.
As for the example, no apologies. I know several people in this situation and see nothing wrong with it. Rather otherwise.

Frank: Wouldn’t a language be a public good, if you define a public good as something with very high start up costs and very low marginal costs? It is a very easy matter to use this or that French sentence. It is very difficult to create the French language from whole cloth. If this is the case, then to the extent that French provides utility it seems that you could make a good economic argument that it would make sense for the government to subsidize it because you will have sub-optimal production of French by the market.

Frank McIntyre

April 9, 2004 at 1:55 pm

Your language use clearly has strong repurcussions for my language use— hence one can start thinking about it as a public good. But you need to build more of a framework to get anywhere, because _any_ language is a public good. So it may be that French is overproduced at the expense of English. You have to model all the languages together and think about what would be optimal. I have a student working on Mayan language loss in Guatamala. It is interesting stuff.

Frank, I’m very curious about your student’s work. Is Spanish use reaching a tipping point, so that Mayan language use is declining? I’m doing some similar research on the decreasing use of the Russian language in Ukraine…